Life insurance

Single parents and estate planning issues

May 13, 2022 | by Chepenik Trushin LLP

How can a single parent avoid homestead to protect a minor child?

Florida homestead laws are complex, confusing, and enormously important for homeowners with or without an estate plan. Florida homestead law applies to three categories: (1) creditor protection against reaching a primary residence, (2) property tax exemptions and limitations on annual property value increases, and (3) restrictions on how a homeowner may devise property if there is a surviving spouse or a minor child.

Under this third category, Article X, Section 4(c) of the Florida Constitution states that a homestead property cannot be devised if the owner is survived by a spouse or minor child, except to the spouse if there is no minor child. This section only pertains to devises, or post-death transfers of property. A homeowner is free to mortgage, gift, sell, or deed the property freely while the homeowner is still living. If the homestead is jointly owned by both spouses, then the property can be freely transferred as long as both spouses join on the conveyance.

Your legal responsibilities as a named personal representative in estate planning documents

April 7, 2022 | by Chepenik Trushin LLP

Est. of Pounds v. Miller & Jacobs, P.A., No. 4D21-1362, 2022 WL 39211 (Fla. 4th DCA 2022).

If a will does not specify who should serve as personal representative of an estate, parties can fight over this position through litigation. But what happens if one person obtains a settlement on behalf of an estate, and then another person is appointed as personal representative? The court answered this question in Estate of Pounds v. Miller & Jacobs, P.A., No. 4D21-1362, 2022 WL 39211 (Fla. 4th DCA 2022), giving us insight into why these situations are problematic and why good estate plans need to be carefully drafted.

The decedent died in a motorcycle accident, leaving behind his minor child as the sole heir of the estate. The child’s mother and the decedent’s mother both showed interest in serving as personal representative of the estate, which comes with certain perks, such as earning a personal representative fee, and responsibilities, including distributing estate property. The child’s mother was not married to the decedent.

Do It Yourself Wills in Florida – be very cautious

October 8, 2021 | by Chepenik Trushin LLP

DIY Estate Planning: Can I Make a Will Myself?

While a steady drive towards technology has been growing for decades, the onset of the COVID-19 pandemic tremendously increased our reliance on technology, effectively changing the the way we do nearly everything, including estate planning. Do-It-Yourself (DIY) online services offering legal templates and forms have gained popularity in the wake of the stay-home orders, popular for their convenience and low cost. DIY estate planning forms, such as like a last will and testament, codicils and health care or financial powers of attorney, created without the guidance of an attorney can create several issues.

Take, for instance, the case of Aldrich v. Basile, which the Supreme Court of Florida called “a cautionary tale of the potential dangers of utilizing pre-printed forms and drafting a will without legal assistance.”[1] In Aldrich, a women used a DIY will template that willed several assets to her brother. After creating this will, she inherited some property and large sum of money. Her will, however, did not contain a residuary clause, which accounts for all property not specially bequeathed in the will. Upon her death, her brother and nieces began suit to determine the rightful owner to the inherited money and property, each claiming it was theirs. The Florida Supreme Court held that because the will did not contain a residuary clause, the money and property would pass through intestacy (the law that happens when someone dies without a valid will), meaning it would be split according to the default Florida laws. This case demonstrates the detrimental impact of an online will template can have when it does not adequately address your estate’s specific, changing needs.

“Step-Up in Basis”, a tax law, is it fading away? What you need to know in 2021-2022

June 9, 2021 | by Chepenik Trushin LLP

Biden’s Tax Proposal and the “Step-Up in Basis”: What it Means for Your Estate Plan or Trust

A commonly utilized tax law in estate planning considerations, known as the “step up in basis,” may be in jeopardy. The “step-up,” derived from section 1014 of the Internal Revenue Code, gets applied to the cost basis of property when it is transferred upon death of the transferor. This mechanism has been a beneficial way to minimize the capital gains tax of one’s heirs, especially for property that has greatly appreciated over time. For example, if someone buys a home for $100,000 dollars, and fifty years later the owner sells the home at a time when the home has appreciated in value to $1,000,000, there would be a capital gain of $900,000, to which a long-term capital gains tax rate of 20.00% is applied. However, if the owner dies owning the home, and the home is transferred upon the homeowner’s death at a time when the home has appreciated in value to $100,000, the step up in basis converts the original cost basis to the fair market value of the transferred property at the time of the homeowner’s death. Thus, if the persons inheriting the property were to immediately sell it for $1,000,000, there would be zero capital gain, because the basis is equivalent to the sale price. The step-up in basis has allowed for taxpayers to save tremendous amounts of money on capital gains tax. Note that, although it is often referred to as a “step-up” in basis, it could be a “step-down” if the value of the property a the time of death is less than what the owner purchased it for.

However, the Biden Administration has proposed to eliminate the step-up in basis. In short, this means that heirs will have to pay capital gains tax on inherited assets based upon the cost basis of the donor’s purchase price. According to Biden’s proposed tax plan, there would still be an exemption for capital gains on the first $1,000,000 of capital gains ($2,000,000 for married couples), but gains above the $1,000,000 ($2,000,000 for married couples) will not receive step-up in basis treatment.

What to know under Florida law during COVID-19 – Naming your kids as beneficiaries of life insurance policies

June 19, 2020 | by Chepenik Trushin LLP

COVID-19 – Buying Life Insurance to protect your children, but what happens when you name them as the beneficiaries?

During these uncertain times, people are attempting to prepare for the worst. This is especially true for those who have minor children. The fear of getting infected with the virus, developing a serious illness that could potentially lead to death, and leaving their children unprotected is very real. Thus, individuals are opting to buy life insurance to make sure their children are taken care of in the event of their death.

But what happens when you die and your minor children are the beneficiaries under your life insurance policy? Since minors cannot legally manage property, the court will appoint a guardian to handle the money for the benefit of your children until they reach the age of majority—a guardianship proceeding. Alternatively, life insurance companies will sometimes ask you to name a custodian, which will create a custodianship account under the Florida Uniform Transfers to Minors Act (“UTMA”), also until the age of majority.